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Posted by Maddison Manolis on Jul 29, 2019 2:00:00 PM



The last decade has seen the postal landscape change dramatically, with posts forced to adapt to the increasingly connected society and ever-evolving customer expectations.  In fact, digital-first has essentially become digital-only, and there is a defined need for posts to embrace and invest in new or disruptive technologies across their supply and logistics ecosystems.  This increased investment in logistics will be driven in part by external factors that include the evolution of eCommerce and a diversification away from traditional postal services.

While mail remains a significant source of revenue for posts, letter volumes have continued to decline as eCommerce-based deliveries have increased.  Lightweight packets and parcels now make up the bulk of physical deliveries, and there is a consensus that the postal industry is on the brink of a significant digital transformation that will usher in a new era.


E-Substitution disrupts postal landscape making transformation the norm

Much of this change can be attributed to both 1) e-substitution – the replacement of physical letter transportation by digital communication platforms, and 2) increased internet access.  With this considered, the general response from the postal industry is to reevaluate their current infrastructures and where possible prepare for these changes by developing and implementing a workable digital strategy.  However, building and integrating a digital strategy is far easier said than done.  The reality is only one-quarter of midsize and large organizations are expected to implement some level of new tech-centric initiative by 2021.  

Nonetheless, digital transformation is no longer just a consideration that requires action because of consumer expectation, rather it has become an integral business requirement.  With consumer expectations for goods in consistent alignment with the potential that digital creates, the knock-on effect of new or disruptive technologies has increased the pressure on the logistics and distribution sector.

One of the key consequences of digital disruption, is that it creates new opportunities and increased diversity in terms of products and services (initially at least, this can change over time through mergers and acquisitions).  Moreover, several online retailers are ahead of the curve when it comes to turning disruption into opportunity, with many now investing in logistics.  Recent activities have shown there has been a notable increase in the amount of tech-driven, asset-light start-ups that use the so-called gig economy to compete with established posts.   

This is why retail giants like Amazon are continuing to expand their own logistics capabilities – although it is worth noting this retail behemoth would need to invest a staggering $122 billion to catch up to established logistic operators like UPS and FedEx.  As it stands, Amazon only delivers about 10% of its own packages, U.S. Postal Service handling 62%, UPS 21%, and FedEx delivers around 7%.  Applying these figures to the rest of the world it becomes clear that posts have a significant role to play in eCommerce fulfillment.


Posts must invest in evolving tech

By now the reality that eCommerce is growing exponentially is no secret.  Indeed, Escher’s own research revealed 83%of posts agree eCommerce will have the biggest impact on postal operators.  One of the reasons retailers like Amazon have become so successful is because of how they integrate and use technology to understand (and influence) customer behavior.  So, while everyone agrees customer experience is a key component of digital transformation, the effect and impact these changes bring on the entire logistics ecosystem cannot be understated.

Working with these changes, posts are now embracing digital disruption while leveraging available technologies to provide customers with the tools the need to conduct their business.  Around 80% of posts surveyed by Escher  have mobilized in response to these changes by optimizing POS channels with solutions such as counter automation, online stores and self-service kiosks.  Another 64% said that they plan to expand their physical networks within the next five years – including logistics and distribution.

With all this considered, we should not be surprised if the logistics and distribution sectors continue to evolve, grow and adapt in line with technological advancements.  Reassuringly, posts have proven time and again they do not lack the ability to adapt to disruption and business challenges.  And this is especially important when one considers where technologies are leading us and the strategic role posts will, and continue to play, in logistics and eCommerce fulfillment. 




Sources:  International Post Corporation, Gartner, Goldman Sachs in the Business Insider, Ship Matrix, Escher.

Topics: eCommerce, Technology, digital disruption